Fibonacci Extensions From Scratch
Zaktualizowano
Hi traders!
Evidently, every trader understands the importance of defining the trend with its support and resistance levels. Unfortunately, sometimes it’s kinda difficult or even impossible to do with basic tools. Nevertheless, traders have fixed the problem and evented some indictors that are able to solve this problem. One of them is Fibonacci extensions.
Fibonacci extensions are a way to establish price targets or find projected areas of support or resistance when the price is moving into an area where other methods of finding support or resistance are not applicable or evident.
As you can see, Fib Extensions is some kind of ratios.The ratios themselves are based on something called the Golden Ratio.
How to build Fib Extension?
During the up trend you should initialize the point of previous lower lower. Next point is the higher high and lower low again. The points should be consistent.
Evidently, every trader understands the importance of defining the trend with its support and resistance levels. Unfortunately, sometimes it’s kinda difficult or even impossible to do with basic tools. Nevertheless, traders have fixed the problem and evented some indictors that are able to solve this problem. One of them is Fibonacci extensions.
Fibonacci extensions are a way to establish price targets or find projected areas of support or resistance when the price is moving into an area where other methods of finding support or resistance are not applicable or evident.
As you can see, Fib Extensions is some kind of ratios.The ratios themselves are based on something called the Golden Ratio.
How to build Fib Extension?
During the up trend you should initialize the point of previous lower lower. Next point is the higher high and lower low again. The points should be consistent.
Uwaga
Uwaga
If the price moves through one extension level, it may continue moving toward the next. That said, Fibonacci extensions are areas of possible interest. The price may not stop and/or reverse right at the level, but the area around it may be important. For example, the price may move just past the 1.618 level, or pull up just shy of it, before changing directions.If a trader chooses long entrance, the trader can use the Fibonacci extension levels for an idea of where the stock may go. The same is true for a trader who is short. Fibonacci extension levels can be calculated to give the trader ideas on profit target placement. The trader then has the option to decide whether to cover the position at that level.
Fibonacci extensions can be used for any timeframe or in any market. Typically, clusters of Fibonacci levels indicate a price area that will be significant for the stock, and also for traders in their decision making. Since extension levels can be drawn on different price waves over time, when multiple levels from these different waves converge at one price, that could be a very important area.
Uwaga
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
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